I was reading an article by Pat Regnier on CNN.com, called “Why saving for your future is so hard”. In the article, he writes that planning for your retirement is difficult because you can’t predict your future situation or how to plan for it.

He backs this up with a lot of science – which I like:

Psychologists, economists and legal scholars often speak of people as having multiple selves. This odd idea helps to explain a lot of our mistakes – we just don’t always know what will make our future selves happy. In fact, we make predictable errors, says Carnegie Mellon University economist George Loewenstein, thanks in part to a mental habit called projection bias. We put too much weight on our current tastes when thinking about our future ones.

This article got me thinking about some aspect of my own life that I have a tendency to try and plan.

I read a lot and some of the books I lately I’ve been reading a few books on Zen and how your mindset shapes your reality. I just started reading a book titled, “Zen and the Art of Happiness” and right off the bat there was a concept that I wanted to share:

“Every event that befalls me is absolutely the best possible event that could occur.”

By this, the author is basically asking you to understand that you cannot plan your life. Things happen, some things you will consider to be “good”, some you will consider to be “bad”. But really, you don’t know what the future holds and how it will shape your life, your beliefs and your opinions of “good” and “bad”.

For instance, I have been writing recently that I expect to lose my job soon. The economy is bad and I feel that my boss – whether deserved or not – is not happy with how I do my job.

Here’s the thing though, I don’t like my job. I don’t like where I’m working or what I am doing. It’s causes stress in my life and relationship. It doesn’t interest me or fulfill me as a person. Why am I still doing it? ‘Cause I make a living from it, I have bills to pay and it’s tough to find other jobs right now. But I would be forced to re-evaluate my career, life, goals if I were to get fired, right? So maybe…

“Every event that befalls me is absolutely the best possible event that could occur.”

Just a thought. With that said, I want to share a few other quotes that I feel are related to this subject (I’m a big quote guy). I wrote these down in my planner a long time ago and randomly came across them today – maybe someone’s trying to tell me something?

“Whosoever desires constant success must change his conduct with the times.”
-Niccolo Machiavelli (don’t be scared…it’s still a good quote)

“It’s never too late to be who you might have been”
– George Eliot

A 401(k) is a scary thing when you really think about it.
At least for me. I’m trying to learn all I can about how best to manage my money.

Some things are easy:

• Join
• Invest 10% of my pay (pre-tax)
• Take advantage of the company match (a.k.a. free money)
• Diversify your holdings

Some things are not:

• Out of the limited funds I have to pick from, which funds are the right fund
• How much should I be paying (expense ratios)

Recently, my 401(k) fund swapped out some “under-performing funds” for some that matched their criteria. This, in turn, replaced two of my funds.

Now I’m doing some research into what’s available and what I should be in, but honestly it’s very confusing and I’m not exactly sure what to do.

Yes, I have time before I retire.
But I realize that the better I manage my money now, the harder it will work for me in the time allowed.

So, what do you think about expense ratios and p/e ratios? Any tips out there or solid guidelines?

According to a survey conducted by the Employee Benefit Research Institute, “Nearly half of all workers saving for retirement have savings that fall short of the $25,000 mark”.

This is why I don’t necessarily agree with Dave Ramsey’s idea of postponing contributing to your retirement fund.

• First of all, in most cases, there’ s an employee match (read: free money).
• Secondly, The good ol’ power of compounding interest will always work in your favor.
• And lastly, saving for your future becomes a habit, if not unnoticeable after a while.

It may not be nice to say this but this story actually makes me feel good. I’m only 26 and in pretty good shape with about $10K and growing in my retirement accounts. According to the “Rule of 72“, if I were to stop contributing now I would have $25K in less than 14 years – making me 40 and putting me in the “bad average” in this survey. So basically, I like my chances that I’ll be doing much better than that if I keep going as I am now.

It seems like a long time ago – and it probably was – when I decided to suspend my ROTH IRA contributions in order to focus on eliminating my debt.

But lately, while looking forward to the future, I’ve been thinking of the difference between a traditional and Roth IRA. More specifically, I’ve been wondering if when I re-start my contributions, will I still be in the right vehicle for me.

So in order to answer this question, I took a look at the difference between the two.

In a traditional IRA…

• The money you deposit is not taxed
• Besides the initial deposit – which is taxed – you minimize your taxable income through using a traditional IRA
• Earnings on your contributions are not taxed until withdrawn
• Any withdrawals before you turn 59 1/2 are subject to a 10% early withdrawal penalty
• Unless used for qualified exceptions
• You are taxed upon withdrawal

In a Roth IRA…

• Contributions are not deductible
• Earnings on your contributions are NEVER taxed
• Roth IRA offers tax-exempt earnings, not just taxed-deferred
• A traditional IRA taxes you on your gains once you make the withdrawal. The Roth never taxes you again post-contribution
• Any withdrawals before you turn 59 1/2 are subject to a 10% early withdrawal penalty
• Unless used for qualified exceptions

So, it basically comes down to tax me now or tax me later. This is where some information about tax brackets might come in handy…

Courtesy of 360financialliteracy.org

Generally, a tax bracket is the income tax rate at which you are taxed for a certain range of income. The income ranges vary, depending on your filing status: single, married filing jointly (or qualifying widow(er)), married filing separately, or head of household. Brackets are expressed by their marginal tax rate, which refers to the rate at which your next dollar of income will be taxed. There are six marginal tax rates: 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, and 35 percent.

Year 2004 federal income tax rates for single taxpayers are as follows:

If Taxable Income Is:	Your Tax Is:
Not over $7,150	10% of taxable income
Over $7,150, but not over $29,050	$715 + 15% of excess over $7,150
Over $29,050, but not over $70,350	$4,000 + 25% of excess over $29,050
Over $70,350, but not over $146,750	$14,325 + 28% of excess over $70,350
Over $146,750, but not over $319,100	$35,717 + 33% of excess over $146,750
Over $319,100	$92,592.50 + 35% of excess over $319,100

So…to me (and again I could be wrong – please comment and correct me if I am) it seems that the more money you have, the more you can be taxed.

Therefore, wouldn’t it make sense to have your money grow tax-exempt so that your taxes are taken out at a bracket used for a person of lessor income, rather then later in life when you may actually be worth something…you know…in the financial sense?

Bottom line, I’m happy with my Roth.

Relevant Link: Kiplinger.com – Ride a Roth to Riches